Enter the Dragon

How the Dragon, a new privately funded spacecraft, should revolutionize American space exploration.

In 1957, the Soviets beat the Americans into space by launching the world's first orbiting satellite. For Americans, the so-called "Sputnik moment" was a wake-up call that pushed the United States to increase investment in technology and science education. Months later, the United States launched the Explorer 1 satellite, and the space race was on. Children were encouraged to study math and science, and American know-how helped the U.S. meet the challenge.

But the space program has slowed down dramatically since then and in early December, President Obama talked of the need for a new "Sputnik moment" to revitalize America's once-leading role in technology.

Ironically, that moment happened two days later, but with lamentably little media coverage. This Sputnik moment—actually a "Dragon moment"—delivered a somewhat different message. On Dec. 8, an American company, SpaceX, founded by an immigrant and financed mostly by private U.S. investors, successfully launched sthe Dragon spacecraft into orbit and then recovered it from a splashdown in the Pacific Ocean.

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The message is not just that STEM (science, technology, engineering, and math) education is necessary, but also that this achievement by a private company cost just a fraction of NASA's budget in money and time. Governments are great at funding and carrying out research, but competitive private companies motivated by profit and glory tend to be more efficient and speedier in applying the results.

One example: Right before the launch, SpaceX engineers found a few cracks in the second-stage engine nozzle extension. Rather than haul the spacecraft back to the shop for repairs, they simply analyzed the flaw, trimmed off the affected section, and proceeded with the launch. (To be sure, they might have acted differently had the Dragon been carrying humans.)

The lesson of the Dragon launch is not that NASA is clueless but that government research agencies should not run routine operations that could be better handled by businesses. (NASA in particular has been constrained by years of political infighting and patronage in the Congress, to the point where its mission seems to be employment maintenance rather space exploration.)

I must confess a personal interest in this question. I am writing this from Cape Canaveral, Fla. As a member of NASA's Advisory Council, I am currently visiting its Kennedy Space Center, which is badly in need of upgrading and repairs. Yet right now NASA is spending $475 million on a program that has already been canceled instead of on the space center. The reason: A congressman managed to introduce a provision that prohibits NASA from stopping the spending until a new budget has been approved. Because NASA is still operating under an old budget, the canceled program continues to be funded.

Imagine how those NASA workers must feel: grateful for the paychecks but completely cynical about the value of the work they are doing. Why not pay them the same amount to share their knowledge and skills in high schools? That would be a more useful response.

But back to the Dragon, which succeeded for a number of reasons. First and foremost, SpaceX is a private company. Someone's own money is at stake, so it is not wasted. Its founder, Elon Musk, an immigrant from South Africa (who in his spare time also runs Tesla, the electric-car company), funded it with his own money (which he earned at PayPal, another startup) and that of other private investors. (Yes, SpaceX does have contracts with NASA, but for a fixed price per launch.)

The emphasis at SpaceX is on getting the job done, rather than just doing the job. Whereas governments and government contractors generally enjoy job security, private companies know that the money may run out. Also, private companies compete. Behind SpaceX is a crowd of other private companies developing spacecraft, including Masten Space Systems, Armadillo Aerospace, Blue Origin, and XCOR Aerospace (a company I invest in).

These companies aren't all competing to build precisely the same kind of vehicle. In fact, each considers its own approach superior. This kind of redundancy is actually efficient in the long run, as each player experiments and all of them learn from everyone's failures and successes. In the meantime, each of them is competing not for a single grand prize but for a share of a growing market, risking investors' money and their own reputations.

It is this free-market economy, which rewards useful innovation and purposeful risk-taking, that we should honor and recognize. The U.S. government (or European governments, for that matter) can't get us out of our current economic mess any better than they can get us to the moon at this point. In most areas of endeavor, the government should be a demanding customer rather than a provider (or subsidizer).

In the United States, government fostered the airline business—largely by buying cargo services from private airlines. It also built what became the Internet—and then sensibly left most of the development and day-to-day operations to the private sector.

Now, under Obama's new and sensible space policy, the U.S. government is planning to focus on flying to Mars and so-called "near-Earth objects," purchasing routine transportation to the International Space Station from companies such as SpaceX (instead of from the Russian space program at $60 million or so per astronaut for every round trip). What the Dragon moment makes clear is that the ability to commercialize innovation, not just to create it, is what has made the U.S. economy so robust over the long run.

Esther Dyson, chairman of EDventure Holdings, is an active investor in a variety of start-ups around the world. Her interests include information technology, health care, private aviation, and space travel.

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